Royal College of Nursing says house prices have spiralled beyond reach for its members
The average pay of a nurse with seven years’ experience has risen by nine per cent to £30,165 over the past decade, while house prices rocketed 55 per cent to £256,400.
With additional income from working anti-social hours, extra shifts and on-call payments, the total average yearly pay of a nurse can rise to around £35,340.
The RCN said: “The government launched the First Homes scheme offering discounted houses to some buyers this month, but the majority of nursing staff won’t benefit because their pay has fallen so far behind prices.”
Phill Green, founder at Trufe Money, and former mortgage manager and head of telephone banking at Lloyds, runs a firm which specialises in advising NHS workers and teachers.
“Affordability is based on household income, level of debt, employment type and credit worthiness. NHS workers and teachers are a good lend for banks, probably even slightly better now because their income status is solid,” Green said.
“But there’s no special rate for them. To my knowledge, no bank is doing an NHS special deal,” he said.
The firm offers a 50 per cent discount on its fee for NHS workers — “to say thank you,” — and also aims to support clients by matching unsociable working hours. “We go out of our way to be flexible, and we take as much as possible off their pad, in terms of sorting out their mortgage,” Green said.
Mark Robinson, founder and managing director, Albion Forest, NHS Mortgage Advice, and Teacher Mortgages, regularly advises newly qualified teachers, as well as NHS workers.
“Affordability is definitely an issue. Most lenders are talking about four-and-a-half-times income, whereas realistically, their income is going to increase year-on-year,” Robinson said.
Over five years, a newly qualified teacher’s salary will usually rise by £5,000 to £10,000.
“Kensington Mortgages do let them borrow five times’ salary, but I don’t know of any others,” Robinson added.
As part of the research by RCN, nurses were asked about their experience of buying home.
In one case, Carmel, a registered nurse based in Liverpool, met with a local broker hoping to discover more about shared ownership.
“I contacted a mortgage broker and he may as well have laughed in my face. He said the only way I could afford a semi-detached house as a single person would be to save up £4,000. I said where is that going to come from? I was supporting my retired parents and didn’t have any money to spare,” Carmel told the RCN.
Luckily, the client was not easily put off, has connected with a specialist shared ownership broker and is in the process of applying for a deal.
An RCN spokesperson said: “We spoke to a range of members, and others didn’t say that they felt the same way, but brokers did point out that it would be difficult based on the income, and advised saving up more of a deposit.”
“That is very difficult for nurses who are single parents. The deposit they have can often be the product of years of hard graft and saving. To raise, say, and extra £4,000 that might make the application a bit easier, would be extremely difficult,” they added.
The purpose of the RCN’s research was to demonstrate to government the difficulties faced by nurses seeking to buy a home, and to bring pressure on policymakers to increase nurses’ salaries.
Pat Cullen, RCN general secretary and chief executive, said: “Communities in which nursing staff can’t afford to live are communities at risk of poor health and patient care.”
Brokers optimistic about First Homes scheme but express concerns over rollout
Connells’ new-build mortgage services partner Louise Jacob said: “I think it can only be seen as a positive thing, giving customers another option to fulfil their dream of getting onto the housing ladder.”
Coreco’s managing director Andrew Montlake said that the scheme looked very promising for first-time buyers, especially for key workers who were often priced out of living in cities they worked in.
However, he said that there were questions about how the valuation process would work and how advisers would approach the scheme, as it primarily focuses on a property rather than a mortgage.
The scheme launched earlier this month, with Chorley Building Society, Darlington Building Society, Halifax, Leeds Building Society, Mansfield Building Society, Nationwide Building Society and Newcastle Building Society all participating.
It aims to help first-time buyers and key workers get on to the property ladder, with a minimum 30 per cent discount on market prices on certain new builds, with the discount to stay in place upon resale. Local authorities and neighbourhood planning groups also have discretion to give 40 per cent or 50 per cent discount if they can “demonstrate a need”.
As part of the scheme, the price for properties must not exceed £250,000 outside of London, or £420,000 in Greater London.
Eligibility requirements indicate a combined annual household income should not exceed £80,000 or £90,000 in Greater London, and the purchaser should have a mortgage or purchase plan to fund a minimum of 50 per cent of the purchase price.
The government has said the First Homes scheme should account for 25 per cent affordable housing units delivered by developers.
The first batch of 12 First Homes went on the market last week in Bolsover, East Midlands, with the government pledging to build a further 1,500 homes by the autumn.
First Homes compared to other schemes
Jacob said the First Homes initiative may prove to be cheaper in the long-run than the shared ownership scheme.
She explained that whilst shared ownership was a “great scheme” for people with lower deposits, after rents, service charge and mortgage costs it may not be the most cost-effective way to own a home.
She said: “The government’s First Home scheme offers customers another route that may work out cheaper for customers, both on a monthly basis and in the long run.”
Jacob continued that the introduction of 95 per cent loan to value (LTV) mortgages had been a boon to the market, but this did not typically apply to the new-build sector as it can be excluded as a property type for those with a lower deposit.
Lisa Burns-Kent, new-build sales director at Meridian Mortgages, added it would not be a single solution for brokers but said the “more tools in our tool kit the better”.
She continued: “As a broker you have to consider so many requirements. People may not be eligible for Help to Buy or shared ownership, so there is definitely a place for it.”
Greg Cunnington, Alexander Hall’s director of lender relationships and new homes, said the scheme was a “very welcome addition to the market” but added that due to its various restrictions and requirements it would probably not be as popular as Help to Buy in terms of volume.
He hoped that combined with increased mortgage product availability, suitable affordability criteria for lower deposit mortgages and private schemes, initiatives like First Homes and shared ownership would give low deposit borrowers increased options. He continued that this would be especially important once Help to Buy comes to an end.
Customer demand and rollout
Brokers said there was definite interest in the scheme, with customers already getting in touch with enquiries but added it was still early days as properties needed to be built and further government guidance is needed.
Jacob said she already had clients calling and looking to leverage this scheme over Help to Buy. She also said it had definite appeal due to the discount, as customers were being priced out of areas they lived in and forced to move further away.
However, as the scheme is in its infancy, developers are still getting to grips with it and noted that brokers would need to step up.
Jacob added: “As the scheme is currently in its very early days, I don’t have any developers using it yet. However, when any new scheme is announced, it’s down to people like me (new homes mortgage specialists) to educate developers, local housing associations and councils on how the scheme works, how it can fit into their business model and what the benefits are.”
This was echoed by Burns-Kent who said: “The government [is] very good at launching these things and bringing them to the market, but they need to get lenders and builders on board first.”
“I have got builders coming to me and asking how they can get involved. The guidance needs to be very clear,” she added.
She added that further detail would be needed as to when the scheme would go nationwide, and information was currently “drip-feeding” through.
These concerns were also brought up in a report from the Housing, Communities and Local Government committee last week, which said the First Homes scheme sounded promising, but the government needed to outline its timetable as soon as possible as to when properties would be available. It also said local authorities should have discretion on the proportion of homes built which would be First Homes.
Montlake added: “The proof will be in the proverbial pudding and it’s important that those looking at this type of scheme really understand the details around it and the limitations on resale when they want to move on. Let’s hope it does not cause as many issues as it attempts to solve.”
MPs ‘unpersuaded’ by UK government’s proposals on planning and housebuilding
According to the latest report from the Housing, Communities and Local Government committee, “lack of detail,” about the government’s three areas proposal, “made it difficult to assess how it would function”.
The government proposed that every local authority through its local plan would allocate land in three areas: growth, renewal and protected. Growth areas would be suitable for “substantial development,” renewal areas for development, and development on protected areas would be limited.
The report said that the three areas proposal was potentially unsuitable in urban areas, that local plans may not have the requisite level of detail for developers, and that there was uncertainty around the purpose of renewal areas and level of protection for protected areas.
“Overall, we are unpersuaded that the government’s zoning-based approach will produce a quicker, cheaper, and democratic planning system,” the report noted.
It added that there should be greater clarity on how the government will deliver its ambition of 300,000 housing units a year. The report said that there was “scepticism,” around the validity of the target and whether it can be delivered.
The report continued that the pace of completing planning permission was “too slow,” and that “carrots and sticks are needed to quicken the pace.”
It said that the government should increase the extent of multi-tenure construction on large sites, explore using development corporations and encourage use of smaller sites and small and medium size builders.
Critically, the committee recommended that there should be a time limit of 18 months from the approval of planning permission to construction work commencing, and if work had not progressed adequately then planning permission should be revoked.
The report also warned that the government’s First Homes scheme should not reduce incentives for other types of shared housing, especially shared ownership and social housing.
The First Homes scheme was launched last week with seven lenders signed up so far. It aims to help first-time buyers onto the property ladder with a minimum 30 per cent discount on market price for certain new builds.
The report said that the discount should “remain in perpetuity,” and recommended that it lay out its timetable for First Homes becoming available and local authorities should have discretion as to what proportion of First Homes are built.
Finally, the report recommended that there should be a review of the purpose of the Green Belts and whether they are still effective.
First Homes scheme launches with seven lenders signed up
Chorley Building Society, Darlington Building Society, Halifax, Leeds Building Society, Mansfield Building Society, Nationwide Building Society and Newcastle Building Society have confirmed that they will be providing 95 per cent loan-to-value (LTV) mortgages for the scheme.
The scheme aims to help first-time buyers onto the property ladder with a minimum 30 per cent discount on market price on certain new builds. Prices for properties must not exceed than £250,000 outside of London, or £420,000 in Greater London.
This discount will also be passed on with the property sale to future first-time buyers, which the government says will benefit local communities and key workers, who can be prioritised for these homes.
The government scheme is part of plans to deliver one million homes by 2024.
This first batch consists of 12 First Homes on the market today in Bolsover, East Midlands.
Government is aiming to deliver a further 1,500 homes by the autumn and has said at least 10,000 homes a year could be delivered in the years ahead if there is sufficient demand.
The government also today launched a campaign, Own Your Home, which provides resources on options for home ownership including the government-backed schemes available to first-time buyers.
Andy Mason, head of housing development mortgages at Halifax, said: “As the UK’s largest mortgage lender, we are proud to support the First Homes initiative which will help first-time buyers – particularly those in some of the most valued roles in our communities – to get a foot on the housing ladder.”
He added that the scheme could lead to savings on the market price of up to £107,000 outside of London and £180,000 in London. First-time buyers using the scheme could pay £5,350 less on the deposit and save £536 a month on repayments, Mason said.
The saving is based on the differential of buying a property at 70 per cent of market price whilst taking a 95 per cent LTV with a 4 per cent fixed rate on 25 year repayment.
Nationwide’s mortgages director Henry Jordan said: “Deposits and affordability are the two major issues faced by all first-time buyers today, especially key workers who have played a vital role throughout the pandemic.
“This is why we are pleased to support the new First Home pilot, which aims to help them buy their first property.”
Newcastle Building Society’s chief executive Andrew Haigh added: “Home ownership can often feel out of reach for first time buyers – especially those without access to the bank of mum and dad.
“We’re committed to delivering innovative ways to help first-time buyers find affordable and sustainable ways to own their own home. We’re pleased to be one of the first lenders to support the scheme.”
Leeds Building Society’s CEO Richard Fearon said: “We’re pleased to be supporting the First Homes scheme, which aims to help people realise their dreams of owning their own home.
“Supporting schemes like this is a way to reaffirm our support for first-time buyers and other borrowers who are not well served by the wider market.”
Top 10 most read mortgage broker stories this week – 28/05/2021
Elsewhere, First Homes eligibility criteria, the rush to complete before the stamp duty pause is over and another victory for a broker in an interest-only mis-selling case offered a broad range of reading topics for advisers.
Nationwide cuts first-time buyer, home mover and remortgage rates
Properties selling over asking price reaches record high as supply plummets – NAEA Propertymark
Swindon most affordable alternative for first-time buyers leaving London
Mortgage complaints surge by more than half to 11,835 – The Ombudsman
Government outlines eligibility for First Homes scheme
Sellers receive offers within a month as end of stamp duty holiday draws near
Interest-only mis-selling claim against SPF Private Clients dismissed
LSL sells stake in LMS to focus on financial services strategy
Clydesdale removes 90 per cent LTV FTB product and cuts rates on 85 per cent LTVs
Buy-to-let rates fall to lowest level since January
Government outlines eligibility for First Homes scheme
According to a statement yesterday from minister of state for housing Christopher Pincher, the scheme will open from 28 June and will prioritise first-time buyers.
To be eligible borrowers should not have a combined annual income over £80,000. This is heightened to £90,000 for London.
Those using the First Homes scheme should also use a mortgage for at least 50 per cent of the discounted purchase value in order to deter using these homes as investments, with additional limits placed on letting out First Home properties.
First Homes must be discounted by a minimum of 30 per cent, although local authorities can deepen this minimum discount to 40 percent or 50 per cent if they can provide evidence of need.
Local authorities also have the discretion to impose further caps and criteria such as income caps, prioritising key workers or requiring a local connection based on work or living arrangement.
After the discount is applied properties should be priced at no higher that £250,000, or £420,000 in Greater London.
The scheme also requires a minimum of 25 per cent of all affordable housing units secured through developer contributions to be First Homes.
Some have noted that this could have a damaging effect on a local authority’s supply of social rented housing.
However, Pincher noted: “The government recognises the importance of social rent as part of the affordable housing tenure mix. A local authority should prioritise securing their policy requirements on social rent, once they have secured the 25 per cent First Homes requirement.
“Where other affordable housing units can be secured, these tenure-types should be secured in the relative proportions set out in the development plan,” he added.
The government first consulted on the scheme in February last year, receiving 800 responses in its primary consultation. It then launched a second consultation, which received nearly 2,400 responses, which was published in April this year.
It is one of a raft of measures introduced by the government to improve home ownership including Help To Buy, Right to Buy, stamp duty holiday and planning changes.